Better-than-expected corporate earnings and mixed economic news allowed stocks to move higher during the past weeks. It took 15 years, but the NASDAQ finally made a new all-time high last week. The Index looks very different than it did 15 years ago and is much more reasonably valued, but a lot has changed in the world during that time. In 2000, the Price/Earnings (PE) ratio was 194 versus a ratio of 21 today. But what else was going on in 2000?
Fifteen years ago, America Online (AOL) and Time Warner merged, and companies like Facebook and Twitter didn't exist. The 10-year Treasury yielded 6.39% versus 1.94% today, and the price of gold was $288.60 when it now sits at $1,194.40 per ounce. When the NASDAQ made its high in March of 2000, the Apple iPod was more than a year away from being introduced. Today, Apple is the highest-valued company in the world and the largest component of the NASDAQ.
This week, when we see more economic data, along with the Fed meeting on Wednesday, we'll hopefully get some clues on the economy's performance. The key economic indicators for the week should be Consumer Confidence, first quarter Gross Domestic Product (GDP), Employment Cost Index and the ISM Manufacturing Index. Market participants will be looking for information to determine if the economy is picking up steam in the second quarter.
The breakout of the range for the S&P 500 Index could add some carry-through momentum this week. Bonds remain range-bound and will be looking for more direction from the Fed. I expect market participants to continue to discuss the implications and valuation of the $3 trillion in global debt that has negative yields.
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